Is There a Bullish Case for Dell?

On Monday, Dell (NASDAQ:DELL) landed a two-notch upgrade from an analyst at Goldman Sachs that sent shares up as much as 8 percent before closing just over 4 percent higher. Dell added to those gains on Tuesday, closing up an additional 2.49 percent as investors studied the surprise bullish call by one of Wall Street’s most respected banks.

Where’s the Bullish Case for Dell in a Weak Market?

The mood surrounding the upgrade isn’t so much that Dell is poised to take off — although investor sentiment has to some degree — but that the negative environment that has built up around Dell and the PC industry has been exaggerated. The headwinds may be strong, but it doesn’t mean that progress can’t be made.

“Every now and then a piece of research comes along and it just blows your mind. It forces you to reexamine some of your assumptions,” said Mad Money host Jim Cramer about the Goldman upgrade, according to CNBC. In an incredibly rare move, Goldman upgraded the stock straight from “Sell” to “Buy.” Perhaps things aren’t as bad as we all thought.

Cramer doesn’t necessarily see an aggressively bullish case for the company as much as he agrees that there might be some upside to be had. The analyst’s new target of $13 per share represented a roughly 34.5 percent upside on the stock’s closing price before news of the upgrade broke.

Cramer, as well as the Goldman analyst, also agrees that downside risks remain for Dell and the PC industry — it just takes one glance at Hewlett-Packard (NYSE:HPQ) or the growing dominance of Apple (NASDAQ:AAPL) to ignite concerns…

CHEAT SHEET Analysis: Dell’s Stock Chart Speaks Volumes

A core part of our CHEAT SHEET investing framework compares a stock’s price against its moving averages. Thanks in part to the Goldman upgrade, as of December 3 Dell was trading 6.83 percent above its 20-day simple moving average, or SMA, and 4.92 percent above its 50-day SMA. However, reflecting its poor performance over the past year, the company was still trading 21.43 percent below its 200-day SMA. Some investors with a lot of faith and a high risk tolerance could interpret this as a sign that the stock is cheap.

Since the beginning of 2012 Dell has been in a pronounced downward trend, losing nearly 33 percent of its value this year to date and nearly 37 percent year over year. The company suffered a sharp sell-off in May when it lowered its second-quarter revenue guidance below analyst expectations.

So… About Those Bulls

Plenty of bears growled at the Goldman upgrade and plenty more will growl if investors rally some faith and decide to put their money back into the company. Looking at the trends does not build a very convincing case for Dell or the industry, but the case was never meant to be strong — just, not as bad as it sounds.

“While we expect companies more exposed to traditional PCs like Dell will face continued pressure, we believe that expectations have become too bearish and imply an overly draconian outlook for the computer market,” explained the analyst in the note from Goldman.